Australian Dollar Forecast: Will AUD/USD Reach $0.68500? Aussie Inflation Data in Focus

Aussie Inflation in the Spotlight

On Monday, October 7, Australian inflation numbers could impact buyer demand for the AUD/USD. Economists expect the TD-MI Inflation Gauge to increase by 0.3% in September after dropping by 0.1% in August.

The TD Securities-Melbourne Institute Monthly Inflation Gauge is a weighted measure of goods and services price changes. Economists consider the Index a leading indicator for consumer prices.

An upward trend in the Index could indicate higher consumer prices. This would align with the RBA’s recent warning that the dip in headline inflation may be short-lived. If inflation expectations rise, investors could reduce bets on a Q4 2024 RBA rate cut, possibly pushing the AUD/USD toward $0.68500.

RBA Outlook for Inflation

During the recent RBA press conference, RBA Governor Michele Bullock cautioned about inflation trends,

“It may be that the headline inflation rate could come within the target range, but it may not reflect underlying inflation.”

The RBA Rate Statement also revealed Board Members’ views on inflation:

“Inflation is expected to temporarily decline in July, but forecasts indicate it will not return sustainably to target until 2026.”

US Economic Calendar: FOMC Member Speeches in Focus

Meanwhile, investors should monitor FOMC Member speeches later in the Monday session.

FOMC Members Bowman and Kashkari are on the calendar to speak. Investors should consider their reactions to Friday’s US Jobs Report and insights into future interest rate decisions.

Support for a 50-basis point November Fed rate cut could affect US dollar demand, possibly pushing the AUD/USD toward $0.68500. Conversely, calls to delay a possible Fed rate cut to December may support an AUD/USD drop toward $0.67.

According to the CME FedWatch Tool, the probability of a 50-basis point November Fed rate cut tumbled from 53.3% on September 27 to 0% on October 4.

Short-Term Forecast for AUD/USD

Near-term AUD/USD trends will likely hinge on inflation figures from Australia and FOMC member commentary. Higher inflation signals could boost Aussie dollar demand on expectations of a 2025 RBA rate cut. On the other hand, FOMC member support for aggressive Fed rate cuts may tilt monetary policy divergence in favor of the Aussie dollar.

A narrowing of the interest rate differential between the US and Australia could support an AUD/USD return to $0.68500.

Investors should closely monitor central bank signals and economic indicators, which could influence AUD/USD trends. Beyond the economic calendar, news updates on the Middle East conflict also require consideration. Risk aversion could trigger a flight to safety, impacting Aussie dollar demand.

Traders should monitor real-time data, news updates, and expert commentary to adjust their trading strategies accordingly.

AUD/USD Technical Analysis

Daily Chart: AUD/USD Breakout Intact

Despite last week’s reversal, the AUD/USD holds comfortably above the 50-day and 200-day EMAs, affirming bullish price signals.

A break above the $0.68006 resistance level could support a move toward $0.68500. A return to $0.68500 may give the bulls a run at the $0.69 level.

Traders should consider updates from the Middle East, the Aussie inflation figures, and central bank commentary, which may influence AUD/USD price movements.

Conversely, a break below the 50-day EMA may signal a drop to the $0.67050 support level.

With a 14-period Daily RSI reading of 49.49, the Aussie dollar could drop to the $0.67050 support level before entering oversold territory.